B.C.’s Dim Sum Plans Could Be Watched Across Canada

People buy dried foods for the traditional Chinese new year at Chinatown in Vancouver, Canada.

By Don Curren and Karen Johnson

British Columbia’s bid to be the first big, non-Chinese government to sell dim sum bonds could be closely watched in other provinces across Canada.

The market–where borrowers issue Chinese yuan-denominated debt–is a nascent one, dominated by Chinese state companies and government entities. B.C. officials are in Asia now, saying the province may sell at least 500 million yuan ($80.1 million) worth of bonds as early as January to diversify its financing channels.

The small size of the prospective issue–relative to other provincial bonds, which are typically around 500 million Canadian dollars or more– suggests B.C. is merely dipping its toes in the market, said Jean Charbonneau, head of fixed-income at AGF Management Ltd.

But it’s a natural move for B.C., a province with a large Chinese immigrant population that’s been working to strengthen its economic ties to the Asia-Pacific region.

“This is part of this whole commitment to close ties with Asia, and I think it should be seen in that broad context, as well,” said Mary Webb, a senior economist at Scotiabank who watches Canada’s provinces.

British Columbia has a triple-A credit rating, and its global bond issues denominated in the U.S. dollar have been warmly received by investors. (Separately, ratings agency Moody’s said late Wednesday it is changing its outlook on B.C.’s rating to negative from stable to reflect is view of the risks to the province’s budget from the softened economic outlook, weaker commodity prices and continued expense pressures.)

Canada’s largest provincial bond issuers, Ontario and Quebec, have also done well in global bond markets, and would be well equipped to issue dim sum bonds, if they so desired.

“They both have a very successful track record of exploring a broad range of currencies,” Ms. Webb said.

A statement from Quebec’s finance department said that province has had a policy of diversifying its sources of financing. “In this context, Quebec could consider issuing bonds in Yuan,” it said. Ontario’s finance department didn’t responded to a request for comment on the issue.

Canada’s federal government confines much of its debt issuance to the domestic, Canadian-dollar market, and typically only borrows in other currencies when it is looking to increase its foreign-exchange reserves. In February, the federal government sold a $3-billion “Yankee” bond, its first U.S.-dollar-denominated offering since September 2009. Canada’s finance ministry didn’t respond to requests for comment.

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